Nationwide underlying profit rises, statutory profit falls sharply

(Sharecast News) - Nationwide Building Society reported a rise in underlying annual profit on Thursday, as the integration of Virgin Money helped build a larger and more diversified balance sheet, while statutory profit fell sharply against a prior-year period boosted by a one-off acquisition gain.

The UK mutual reported underlying profit before tax of �2.03bn for the year ended 31 March, up 9% from �1.85bn a year earlier.

Statutory profit before tax fell to �1.49bn from �2.30bn, after the latest Fairer Share payment and as the previous year included a one-off gain following the acquisition of Virgin Money.

Total underlying income rose to �6.38bn from �5.21bn, while underlying net interest margin improved to 1.61% from 1.55%.

Nationwide said the results reflected a full year of the larger group following the Virgin Money acquisition, compared with six months of Virgin Money in the previous reporting period.

Underlying costs rose to �4.02bn from �3.18bn, reflecting the cost of running the enlarged business and �127m of integration spend, although like-for-like cost growth excluding acquisition and integration costs remained below inflation.

The group said it delivered market-leading growth in mortgages, retail deposits and personal current accounts.

Mortgage net lending was �10.3bn, down from �15.9bn but still described as market-leading, while mortgage balances rose to �286.3bn and market share increased to 16.3%.

Retail deposits grew by �10.1bn to �270.8bn, with market share held at 12.2%, while Nationwide opened more than one million personal current accounts and increased its share of current account balances to 10.9%.

Consumer lending balances increased to �11.6bn from �11.1bn, driven mainly by credit card balances, while business deposits rose to �22.8bn from �21.1bn.

Business lending balances slipped to �14.9bn from �15.1bn in what Nationwide called an increasingly competitive market.

Asset quality remained resilient, with low and stable arrears. The cost of risk increased to 11 basis points from seven basis points, while underlying impairment charges rose to �331m from �176m, reflecting a full year of the enlarged and more diversified balance sheet.

Mortgage accounts more than three months in arrears fell to 0.39% from 0.43%, while consumer lending arrears were broadly stable at 1.10%.

Nationwide said it delivered �1.8bn of member value during the year, including �0.4bn through its third Fairer Share payment. Member financial benefit fell to �1.4bn from �1.8bn, partly because lower Bank of England interest rates narrowed mortgage and deposit rate differentials, though the mutual said its average member deposit rates were 58 basis points above the market average.

"More people than ever are choosing Nationwide," said chief executive Dame Debbie Crosbie.

"Our growth in mortgages, retail deposits and personal current accounts is leading the market.

"And we delivered all this while continuing to set the standard for customer service and member value."

Nationwide said the integration of Virgin Money was progressing, with the majority of the business legally transferred to Nationwide on 2 April.

Virgin Money personal current account, savings and mortgage customers are now Nationwide members, and the group said customer migration to the Nationwide brand would begin in 2026.

It also remained on track to launch its first Nationwide-branded mainstream business banking products in the first half of 2027.

The balance sheet remained strong, with a common equity tier 1 ratio of 19.1%, unchanged year on year, and a leverage ratio of 5.3%, up from 5.2%. The average liquidity coverage ratio was 169%, compared with 174% a year earlier.

Nationwide said the sharp rise in global energy prices linked to developments in the Middle East represented a shock to the global economy and was likely to mean slower UK growth and higher inflation in the near term.

However, it said households and businesses appeared relatively well placed, with employment still relatively high and household debt-to-income at its lowest level for two decades, adding that it was "well placed and ready" to support members and customers.

Reporting by Josh White for Sharecast.com.